US Secretary of State John Kerry has ended meetings with Israeli and Palestinian leaders without an agreement on resuming peace talks - but said gaps had been narrowed and he would return to the region soon.

"We have made real progress on this trip. And I believe that with a little more work, the start of final status negotiations could be within reach," he said before his departure from Tel Aviv on Sunday.

"We started out with very wide gaps and we have narrowed those considerably," he said, without elaborating. "We are making progress. That's what's important and that's what will bring me back here."

Kerry has met Israeli Prime Minister Binyamin Netanyahu and Palestinian President Mahmoud Abbas separately over four days in the hope of finding a formula to revive direct peace talks which stalled in 2010 over a dispute over illegal settlements in the occupied West Bank.

Kerry said both Netanyahu and Abbas had asked him "to return to the area soon... a sign that they share my cautious optimism".

Palestinian chief negotiator Saeb Erekat said there had been some progress, "but we can't say there's been a breakthrough".

September deadline

Abbas has said that, for new talks to be held, Netanyahu must freeze the settlements - illegal under international law - and recognise the West Bank's boundary before its capture by Israel in the 1967 Middle East war as the basis for the border of a future Palestinian state.

Israel, seeking to keep the settlements under any peace accord, opposes those terms and deems them preconditions.

"Israel is prepared to enter into negotiations without delay, without preconditions, and we are not placing any barriers on the resumption of final-status talks on a permanent peace agreement between the Palestinians and us," Netanyahu told his cabinet after overnight talks on Saturday with Kerry.

Kerry is keen to get fresh peacemaking under way before the United Nations General Assembly, which has already granted defacto recognition to a Palestinian state, convenes in September.